Selected Additional References and Cases 407Selected Additional References and Cases
The effects of alternative accounting policies on both financial state-
ments and ratios based on these statements are discussed in the books
referenced in Chapter 9.For further information on the relative usefulness of various fi-
nancial ratios,see
Chen, Kung H., and Thomas A. Shimerda, “An Empirical
Analysis of Useful Financial Ratios,” Financial Manage-
ment,Spring 1981, 51–60.Considerable work has been done to establish the relationship be-
tween bond ratings and financial ratios.For one example,see
Belkaoui, Ahmed, Industrial Bonds and the Rating Process
(London: Quorum Books, 1983).
For sources of ratios and common size statements,see the following:
Dun & Bradstreet, Key Business Ratios(New York: Updated
annually).
Financial Research Associates, Financial Studies of the Small
Business(Arlington, VA: Updated annually).
Robert Morris Associates, Annual Statement Studies
(Philadelphia: Updated annually).
The following cases from the Cases in Financial Management
series focus on financial analysis:
Case 35, “Mark X Company (A),” which illustrates the use of
ratio analysis in the evaluation of a firm’s existing and po-
tential financial positions.
Case 36, “Garden State Container Corporation,” which is
similar in content to Case 35.
Case 36A, “Safe Packaging Corporation,” which updates
Case 36.g. Perform a common size analysis and percent change analysis. What do these analyses tell
you about Computron?
h. Use the extended Du Pont equation to provide a summary and overview of Computron’s fi-
nancial condition as projected for 2003. What are the firm’s major strengths and weaknesses?
i. What are some potential problems and limitations of financial ratio analysis?
j. What are some qualitative factors analysts should consider when evaluating a company’s
likely future financial performance?